Yam Tethys sees disruptions due to dwindling gas reserves

Yam Tethys told customers it is currently able to meet full demand, but the probability of disruptions will increase as the reserves dwindle faster than originally projected.

Yam Tethys has warned Israel Electric Corporation (IEC) (TASE: ELEC.B22) and other customers of possible natural gas supply disruptions due to the dwindling reserves. Since the suspension of natural gas deliveries from Egypt in July, Yam Tethys, owned by Delek Group Ltd. (TASE: DLEKG) and Noble Energy Inc. (NYSE: NBL), has been the sole supplier of natural gas to Israel from its Mari B well offshore from Ashkelon.

Yam Tethys believes that technical challenges in extracting gas will mount before the end of 2011, due to current rate of production. At a conference summoned last week, it informed customers that if it cannot supply all the gas needed, it would delivery gas on a pro rata basis derived from the contractual amounts.

Yam Tethys said that while it is currently able to meet full demand, the probability of disruptions would increase as the reserves dwindle faster than originally projected.

In addition to IEC, Yam Tethys's customers include Oil Refineries Ltd. (TASE:ORL), the Paz Ashdod Refinery, Hadera Paper Ltd. (AMEX: AIP; TASE: AIP), Israel Chemicals Ltd's (TASE: ICL) Dead Sea Works, and the Ashkelon desalination plant, which is partly owned by Delek. Yam Tethys has supplied gas to IEC since 2004, providing two-thirds of its gas consumption in recent years, or 3.4 billion cubic meters of gas a year.

Since terrorist attacks began disrupting Egyptian gas deliveries in February, IEC has increased its gas purchases from Yam Tethys. According to Yam Tethys, IEC's purchases have peaked at an annualized 6.5 billion cubic meters, well above the capacity of Yam Tethys' pipeline.

Last week, Minister of National Infrastructures Uzi Landau capped IEC's gas purchases from Yam Tethys to 2.5 billion cubic meters a year.

Published by Globes [online], Israel business news - www.globes-online.com - on October 16, 2011

© Copyright of Globes Publisher Itonut (1983) Ltd. 2011

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